Would you use a higher or lower discount rate for a company that generates no profit now, but will do so in the future?

ripxxx's picture
Rank: King Kong | 1,375

Would you use a higher or lower discount rate for a company that generates no profit now, but will do so in the future?

Comments (2)

Aug 20, 2018

Having no profit now massively impacts cost of equity and cost of debt. You're talking about a risk premium, and a business that makes no profit has a bunch of risks. In early stage companies, I've seen WACCs of 50+% if there is funding risk.

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Aug 20, 2018
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